Topic: Monetary Policy
What backs the US Dollar? Is it true that the US dollar is "backed by nothing"?by Harry P
(libertarian)
Friday, January 11, 2008
It is a common assumption by those who try to explain the problems of our current US monetary system (Fiat dollars), controlled by the private bankers at the Federal Reserve Bank (FRB), to say that our money is created out of "thin air" and is "backed by nothing".
I believe that these terms are too vague and cause a lot of confusion about the argument that the US dollar is not sound money. Fiat Money is simply a paper currency made legal tender by law and not backed by gold or silver. What's so bad about that?
The US Dollar is "backed by nothing". I do not believe that this is a true or accurate assessment of fiat money. If the USD was truly backed by nothing, I doubt it would have continued to be accepted as the "world currency" even after it was divorced from any redemption in gold or silver. It continued to be accepted as such because the fiat dollar is actually backed by something even greater than gold; it is backed by the labor, wealth and property of "The American People"!
What does this mean? This may be great for the FRB bankers and their world banking counterparts. It may be great for governments receiving our dollars as "aid". But it has been and will continue to be at the expense of the property and freedom of every American. Why not accept the US dollar as the world currency when it gives the rest of the world a chance to "Own Us!!"
The US Dollar is created out of "thin air"! This is only partially true. If you mean that the FRB and our government central planners can create new money anytime they want, then the answer is yes. But, since the dollar is actually a claim against the assets of the American people, then no, it is not "thin air". Every new dollar creates new debt against our very livelihood.
I have changed my talking points about the elitist central planners; the FRB bankers and the corrupt government official in the pocket of big business and the military industrial complex to this:
"Ever since gold was removed as the backing of our currency, your personal labor and property have taken gold's place as collateral for our national debt. Every time the Federal Reserve Bank creates new money, it is a claim against your labor and property. It's not a coincident that the IRS was created at the same time as the FRB. It is their agency to collect your payments against your indebtedness.
Without a sound monetary system, we become the chattel for our national debt (9 trillion dollars and counting). This represents about $30,000 for every man, women and child in our country. That's $120,000 worth of debt placed directly on the shoulders of a family of 4. We have become property guaranteeing payment to the world bankers and other nations accepting our currency." (End)
When a person, business or a country's debt goes beyond its ability to pay, it will sooner or later face bankruptcy. We are already seeing a huge rise in home foreclosures across the country caused by run-away inflation by new dollar creation by the FRB. The bankers are collecting on the debt by taking the very homes of our fellow Americans (as predicted by Jefferson those many years ago). This will be one of the greatest transfers of wealth from the middle class to the central bankers and government central planners in history.
I think that one of the most critical issues of the 2008 Presidential campaign is the fall in value of the US dollar in the world currency markets. If this trend is not reversed, the United States will become a "second rate debtor nation" to the rest of the major world powers, who by the way already hold a large portion of our financial obligations. This most likely will lead to the end of our sovereign nation replaced by some United Nations type government. What we would never lose in war, we will lose in bankruptcy.
Of all the Presidential candidates, only Dr. Ron Paul will even discuss the issue of sound money. In every debate other candidates actually try to make fun of Dr. Paul about this issue (the debates he isn't excluded from!). After Iowa and NH, I'm not so sure the American people have suffered enough to see the truth but they will come to see the truth one way or another.
Did you like this article? If you did, Thumb It! 109 thumbs so far
The views expressed in this
article are those of Harry P only and do not represent
the views of Nolan Chart, LLC or its affiliates. Harry P is
solely responsible for the contents of this article and is not an
employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.
Posted By: Jake, the champion of the constitution
Date: 2008-09-26 18:49:49
Dear Harry P -
Turns out you were right way back in January that we needed to debate this!
I tried to answer your question in one of the first articles of my Money Matrix series, please feel free to take a look at "What is a Dollar Bill Worth?"
The US dollar is backed by the debt created by the government in name of taxpayers. This debt is with the actual taxpayers or to foreign governments.
The US government issues bonds, which are promises to pay a certain amount in a certain future date. These are sold at a discount to holders who can in turn cash them in the day they mature. The only thing the government has to guarantee those bonds are future tax revenues.
The only thing that keeps the Dollar going is that there are too many (and I mean too many -- I think over $7 trillion) outstanding government bonds extending out to about 30 years.
Also, currencies around the world are paired to the dollar, which obligates the foreign governments to hold dollar reserves for trade.
There are those (I'm not saying I'm one of them) who believe that the whole Iraq war part 2 was triggered by Saddam's threat to start accepting payments for oil in Euros only, which would cause consumer countries to have to convert good part of their reserves from dollars to euros, flooding the market with dollars and forcing an incalculable devaluation of our currency.
Want to comment on this
article? Leave your comment here. Your email address is
required to track your comment. However, we will neither
publish your email address nor distribute it to other
organizations or persons. The only reason we might use
it would be if we needed to contact you regarding your
comment. All comments are subject to our
terms of use policy.
